# Turnover is a Bad Metric By:: [[Brian Heath]] 2024-09-06 Many organizations and human resource departments focus on turnover rate as an indicator of culture and costs if they are sophisticated enough to know the cost associated with turnover. It is assumed that turnover should be as low as possible because it means people want to work at the organization and they are being compensated correctly. However, turnover is not that straightforward. Let's first look at very high turnover. When turnover is high, there is certainly a high cost associated with it. Some estimate that the cost of hiring someone new is 1.5 times the salary of the position. Thus, high turnover equates to high costs. The question is whether high turnover is bad. While costly in one dimension, high turnover could mean that those who need to leave the organization are leaving. Undoubtedly, the cost of having a group of people in the organization who are not required or effective is much higher in the long term than the turnover costs. Of course, most organizations and managers do not think in these terms. They assume that any turnover is bad turnover and that good workers are leaving. This stems from the broader assumption that the organization is, or at least should be, a good place to work. Therefore, if people leave at a high rate, they are good people, and the organization will no longer be good. Instead of reacting, a wise leader asks who has left before making a judgment. When looking at low turnover, similar dynamics are observed. Many assume low turnover is good because good people aren't leaving, and the organization is good. But, as highlighted earlier, the cost of having someone who is not needed or effective is much higher than the turnover cost. In all likelihood, organizations with extremely low turnover are entirely ineffective at doing anything. Given the accelerating speed of change in technology and business, along with increasingly more complex decision criteria, having very low turnover means having people who are not growing or developing. Think of it this way: if one's organization is a hierarchy, which it most certainly is, there are fewer roles at the top than at the bottom. If one's organization is developing new people, processes, and opportunities, there should be competition to rise through the ranks. Some will win, and others will lose. Those who fail will likely move on as there are not enough roles at the top. Thus, a natural amount of healthy turnover is caused by healthily doing business. Again, the wise leader not only asks who is leaving but also asks who is staying. Turnover is merely a proxy metric around organizational health. It can quite literally be at any level (high, medium, or low) and be deemed good or bad. What one must do is evaluate who is leaving and, if possible, why they are leaving. #### Related Items [[Human Resources]] [[Metrics]] [[Performance]] [[Organization]] [[Management]] [[Analytics]]